PRESS RELEASE 26 February 2002

Issued jointly with the National Pensioners' Convention

Low pay leads to low pensions

Britains' biggest pensioners' organisation, the National Pensioners' Convention (NPC) and the Low Pay Unit have issued a timely warning to the government concerning the problems facing future generations of retired people.

Research by the two organisations show that today's low-paid will be tomorrow's poorest pensioners, surving on means-tested benefits and a dwindling state pension. These findings raise serious questions about the Government's existing pensions policy.

The warning follows recent announcements by a number of leading companies to close their final salary schemes to new and existing employees, and the publication of figures showing the low take-up of stakeholder pensions (SP) aimed at the low-paid.

Rodney Bickerstaffe, President of the National Pensioners' Convention, said:
"The Government's existing pensions policy is unsustainable. We are creating a situation in which an entire generation of low-paid workers will find themselves in retirement without a decent company, without a secure private pension, and relying on a dwindling state pension. If we think the scale of pensioner povert is bad today - just waits and see what it will be like in 10 or 15 years time.

We urge the Government to recognise that stakeholder, private and occupational schemes are no substitute for a decent state pension, linked to earnings. They should conduct a wholesale review of their policy and support a universal system that will provide financial security to all older people."

Richard Towers, Director of the Low Pay Unit, said:
"Take-up for stakeholder pensions has been low, and it appears that more higher earners have taken it up as a device for avoiding tax than those for whom it was intended. More importantly, however, the stakeholder pension leaves the low-paid saver vulnerable to the risks of the financial markets at the same time as being discriminated against in the labour market.

We echo the NPC's call for a universal state pension system. It cannot be right to add the insult of a meagre pension to the injury of a working life spent in undervalued, underpaid employment."

For further information contact:
Richard Towers, LPU, on 0207-435-4268 or Neil Duncan-Jordan, NPC, on 0207 431 9820

Notes to Editors:

• The Association of British Insurers (ABI) estimates that 416,000 stakeholder pensions had been sold by 13 November 2001. The Government's target group for the SP was 5 million low-paid workers. The ABI states that only 37,000 of this target group have taken up the scheme, leaving 379,000 who taken up the scheme from higher-earning groups.
• Ten million workers (two-fifths of the working population) are currently paying National Insurance contributions but have neither a personal nor occupational pension and will be relying on the state pension alone.
• Britain has 12 million people living in poverty. 3.5 million of these live in households with at least one income from full- or part-time employment.
• Britain has 11 million pensioners. 2 million currently qualify for the Minimum Income Guarantee. It is estimated that there will be 16 million pensioners by 2030.